Applicants for DRC membership, members, responsibly connected individuals and employees must meet certain conditions in order to become a member and maintain membership in DRC. When those conditions are not met, applicants and members may be required to post financial security. Financial security is a sum of money held by DRC (for a defined period of time) as a promise to conduct business in accordance with our rules. If the member violates a provision of the DRC by-laws and Operating Rules, like failing to pay an arbitration award, DRC may distribute the funds, as provided in the Security Agreement in place between the member and DRC.
DRC sometimes requires financial security for reasons such as: employing an individual who has previously been insolvent; being named in a court order; being expelled from DRC within the last five years; and the list continues. Additionally, a member who would normally be expelled from DRC membership may avoid expulsion by posting financial security.
There are two types of financial security: (i) applicant / member; and, (ii) employee. Applicant and member bonds** are required when the applicant or member is responsible for an act that would trigger our bonding policy (i.e. filing a proposal with creditors for cents on the dollar). In the example, the amount of security required would start at fifty thousand dollars but could increase when considering aggravating and mitigating factors such as, the size of the business, the impact a potential insolvency may have on the industry, the type of operation, prior violations, the reason for seeking financial security, etc.
Members and applicants may also be required to post financial security when they employ an individual who does not meet the membership qualifications as defined in the DRC Operating Rules. Unlike applicant and member bonds, employee bonds are set at a maximum of twenty-five or fifty thousand dollars, depending on the individual’s violation and their new role at the member company.
If a member has posted financial security, for any reason, and they fail to meet their debts as they come due or suspend the operations of a business with money owing, DRC will use that money to pay other members who submit a proof of claim. We would caution, please do not extend additional credit based on the assumption a company has a bond posted, and therefore you will get paid either way. Particularly in the case of an employee bond with a set maximum, it is not likely the financial security will cover all claims if the employer finds themselves in serious financial trouble.
For the list of members with financial security posted, log in to the members only section of our website, click on the “publications” tab and open “DRC Members Who Have Financial Security Posted.”
If you have any questions about our bonding policy please contact our office.
DRC Help Desk | 613-234-0982 | Info@fvdrc.com
** for the purposes of this article, “bond” is used to refer to “financial security”